‘Peo­ple are Now Ready to Pay a Pre­mium to Fly with Vis­tara’

The Economic Times - - Companies: Pursuit Of Profit -

Vis­tara has man­aged to fill a higher per­cent­age of seats in the econ­omy class than any other air­line in the coun­try while charg­ing higher fares on av­er­age, said the full-ser­vice air­line’s chief strat­egy of­fi­cer San­jiv Kapoor. He told Mi­hir Mishra in an in­ter­view that peo­ple are ready to pay a small pre­mium for fly­ing with the air­line. Edited ex­cerpts:

How has Vis­tara fared dur­ing its sec­ond year of op­er­a­tions? We are on a mea­sured growth plan. We are adding four air­craft in 2017 and we may add five air­craft next year. In 2016, our net­work grew sig­nif­i­cantly. We added four air­craft and grew our fleet from nine to 13 air­craft, a 45% in­crease. But we have ag­gres­sively ex­panded on the num­ber of flights with the same fleet, which has grown 80%. That also says how ag­gres­sively we have in­creased our fleet util­i­sa­tion, which is now ap­proach­ing 13 hours a day. We are pleased with this per­for­mance, as we have achieved this num­ber de­spite be­ing a full-ser­vice car­rier and with­out the ben­e­fit of in­ter­na­tional night-fly­ing.

The load fac­tor for De­cem­ber was 85.1% and Jan­uary (the avi­a­tion reg­u­la­tor’s of­fi­cial re­port for Jan­uary is yet to be re­leased) and Fe­bru­ary are also turn­ing out to be the same. Our econ­omy class load dur­ing De­cem­ber was in the range of 94%, which is higher than any­one else’s. I agree that we have a lower num­ber of seats in the econ­omy sec­tion of our Air­bus A320s and it’s eas­ier to fill them, but we do not have the ben­e­fit of smaller 70-seat air­craft ei­ther, which are even eas­ier to fill. Over­all load of 85% means our pre­mium classes are also getting filled. Both busi­ness and pre­mium econ­omy seg­ments are fill­ing up. A lot of ques­tions were be­ing asked about pre­mium econ­omy but that has be­come a key dif­fer­en­tia­tor for us now and a lot of cor­po­rates have started ask­ing for pre­mium econ­omy.

Of­ten Vis­tara flight tick­ets are cheaper than that of the low-cost car­ri­ers. Are you fill­ing your planes by of­fer­ing cheaper fares?

ON LOAD FAC­TOR

Our av­er­age fares are, of course, higher than LCCs. Even our av­er­age econ­omy class fares are higher com­pared to our low-cost peers. No­tably, our av­er­age fares have been in­creas­ing ev­ery quar­ter. We have achieved 94% load fac­tors by fill­ing our planes on the back of a strat­egy. Our past record shows that a cer­tain per­cent­age of seats are filled within 30 days of the flight and that per­cent­age does not change much. The rest of the seats, we want to sell as much as we can in ad­vance be­cause seats are per­ish­able, and can­not be put back on the shelf and sold later af­ter the air­craft de­parts.

The other thing that it does is that the ear­lier you achieve the base load fac­tor the num­ber of dis­tressed seats to be sold at the last minute are less. Hence, our av­er­age fares go up be­cause the abil­ity to charge higher fares is much more for the re­main­ing seats for last-minute pas­sen­gers. Our yields are getting su­pe­rior to our LCC peers. Our rev­enues are ris­ing and costs are de­creas­ing and both these met­rics are head­ing in the right di­rec­tion. Vis­tara is not num­ber one in terms of on-time per­for­mance any­more. Is that a con­cern for you? We were num­ber one for a long time in terms of on-time per­for­mance de­spite be­ing Delhi-cen­tric, where ATC con­ges­tion is high and where fog im­pacts op­er­a­tions dur­ing the win­ter months. We are aware that we have lost our num­ber one slot in this fog sea­son and we are in­ter­nally work­ing to re­gain our po­si­tion.

Fuel prices have started inch­ing up and that is go­ing to in­crease pres­sure on air­lines. Do you think the lower fare regime is set to end? Pric­ing dis­ci­pline is start­ing to re­turn. Crazy pric­ing was hap­pen­ing even last minute ear­lier but ris­ing fuel prices have brought some pric­ing dis­ci­pline. Due to lower fuel prices, we were giv­ing away the pric­ing power on tick­ets be­ing booked last minute.

The trick is to of­fer at­trac­tive prices for early book­ers and charge more closer to de­par­ture for less price sen­si­tive trav­ellers. If the in­dus­try is suc­cess­ful in rais­ing fares by 30-40 cents ev­ery time oil prices go up by one dol­lar, I think we will be OK so long as oil prices re­main in a rea­son­able range.

Do you think ca­pac­ity con­straints at air­ports will im­pact avi­a­tion growth? I think much of the ca­pac­ity con­straints at air­ports like Mum­bai, Ben­galuru and Delhi will be ad­dressed be­tween five and seven years from now. The other large air­ports are also work­ing to in­crease han­dling ca­pac­ity.

But an equally big prob­lem is the ca­pac­ity con­straints at smaller air­ports like Goa and Pune, which are dual-use air­ports and there is no scope for any ad­di­tion of flights at these air­ports. Look­ing at the ex­pan­sion, I am also wor­ried about how these planes will be ab­sorbed and even big­ger ques­tion is the park­ing bays at these air­ports.

If the infrastructure is­sues are not fixed and air­lines are not able to add air­craft and mar­ket keeps grow­ing, fares will go up, which will not be good for con­sumers and the coun­try too.

Is Vis­tara plan­ning to go in for a mega air­craft or­der? I think Phee Teik Yeoh (Vis­tara CEO) has men­tioned this in in­ter­views. We are work­ing on a long-term or­der and in­ter­na­tional (op­er­a­tions) is in our plan. I do not think you will see any 400 or even 200 air­craft or­der from us. But the or­der, when­ever it hap­pens, will be a mean­ing­ful or­der.

ET AR­CHIVES

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